ANCHORAGE — A controversial project to expand the Port of Anchorage and replace its old docks may be abandoned as its costs continue to escalate.

At Anchorage Mayor Dan Sullivan’s request, the port has proposed a scaled-back version that would shore up old, corroded pilings and finish two new barge berths and one berth for ships. But the big cargo carriers that bring in most of the goods consumed by Alaskans would remain at the old dock, which the port says would fail in a major earthquake.

Sullivan, port officials and Assembly members dislike the scaled-back option, which still carries a big price tag of more than $650 million, counting money already spent.

At the same time, the latest estimate to replace the existing dock in its entirety has risen to nearly $1.2 billion, triple the figure stated in 2005.

If the smaller project is all that is built, “we would call that a win and a victory and cut it off at that point,” Port Director Bill Sheffield told Assembly members at a recent briefing.

But the city doesn’t have money in hand for either approach.

The port turns 50 this year, and the old steel piles that hold up the dock are rusting out, officials say. The full-scale project involves creating a new dock face 1.5 miles long out of sheets of steel, and backfilling it with gravel to create new land. Cargo ships would get new berths. A petroleum dock would be redone. But the project has been plagued by financial and construction troubles.

Some are putting the blame squarely on the shoulders of Sheffield, a well-connected former governor who has been responsible for securing the funds.

State Rep. Chris Tuck, an Anchorage Democrat and electrician who’s done work at the port, said the city should look into replacing Sheffield.

“We need to get out of this mess,” Tuck said. “We might have to take a fresh look.”

Bob Shavelson, head of the environmental advocacy group Cook Inletkeeper, described the project as a disaster.

“I would say it’s the greatest example of project mismanagement and taxpayer fraud in the history of Alaska,” Shavelson said in an interview from his base in Homer. “And Bill Sheffield has to be held accountable.”

Sullivan said the project was mismanaged, but the escalating costs and construction problems aren’t Sheffield’s fault. The city in 2003 gave the lead role to a federal agency called the Maritime Administration, which had never run a port-construction project before. Sullivan said as he understands it, the city didn’t have a choice since much of the money for the project was federal.

Still, asked whether he had full confidence in his port director, Sullivan declined to answer. He said it was a personnel matter and not something he wanted to discuss in public.

For now, the project remains stalled. Large sections of new dock already installed are damaged — the work must be redone. Port officials say crews will work this summer inspecting and dismantling sections where the sheets of pile were bent and mangled as they were driven into the sea floor. No new sections are expected to be built this summer or next.

Port is essential

City and state officials say the port is essential to the state. Much of what Alaskans eat, wear and drive arrives through it.

The city had been looking to replace its dock on piles with a traditional dock like the old one when Sheffield began pushing the bulkhead system, which extends the shore into the sea. If the full version were built, the port would get 135 acres of new land. Under the scaled-back version, 65 acres would be created.

Sheffield, 82, a former one-term governor, has held the port job since 2001, when he was appointed by then-Mayor George Wuerch. A registered Democrat, he has been bipartisan in his political fundraising. He often headlines or hosts fund-raisers for local, state and federal politicians, including Sullivan, Gov. Sean Parnell and U.S. Rep. Don Young, all Republicans.

“Anyone else who came in $800 million over budget would have lost their job without the political contacts Mr. Sheffield has with Rep. Young and others,” state Rep. Les Gara, an Anchorage Democrat, said in an e-mail. He was responding to a Daily News query about solutions and accountability for the port project sent to Assembly members and Anchorage-area legislators.

Sullivan said that Sheffield’s political connections are irrelevant.

A citizen activist and retired longshoreman, Jack Veit, also says Sheffield needs to go. Veit flew to Juneau to brief legislators about the expansion problems and also created a website, www.publicadvocateak.com, to call attention to the issue.

Sheffield said port officials didn’t know the extent of the damaged installation from 2009 until more than a year later. He said he knows he’s the face of the project and is taking heat for the problems, but doesn’t see what he could have done differently.

“Right now we’re doing everything we can to dig ourselves out of this hole so when we go forward in earnest,” he said. Now that the problems are known, the construction methods are being changed to prevent steel sheets from hitting hard ground or rock and bending, he said.

He said he hopes to stay on as port director.

“I’m not proud of what happened in 2009, but I’m proud we’ve found the problem,” he said.

How did it get this bad?

So far, no city tax dollars have gone into the project. Much of the $279 million collected so far has come from congressional earmarks. The state has been putting in $10 million to $20 million a year.

The two options for continuing the expansion were presented at a May 6 briefing for an Anchorage Assembly committee by Sheffield, port engineer Todd Cowles and municipal manager George Vakalis.

They didn’t like what they heard.

“I’m trying to figure out how it got this bad,” Assembly member Dick Traini said.

Assembly member Patrick Flynn, who has chaired the special Assembly committee on the port for the past year, was flabbergasted that the limited option didn’t include new berths for the cargo ships.

Assembly Chairwoman Debbie Ossiander said the city can’t afford the full expansion, which would cost another $922 million above the $265 million already spent.

State legislators say they have concerns, too, though recent changes to add more city oversight are on target.

“Certainly, time delays and cost escalations have brought into question the present port project viability,” Anna Fairclough, an Eagle River Republican and vice chair of the House Finance Committee, said in an e-mail.

Tuck said if the state is picking up the bill, the state should take charge of the project.

A budget proposal in the state House would provide $37.5 million for the expansion and require quarterly progress reports.

On Friday, Gara, the Anchorage House member, proposed cutting the port budget item to $20 million, the amount proposed by Parnell. But his amendment to the capital budget failed in a party-line vote on the House floor Friday evening. Republicans voted to keep the higher amount.

Sheffield also has proposed that the city receive $300 million from a state bond package to complete one phase of the expansion.

Lack of oversight

The 2003 port project agreement pushed during the last days of the Wuerch administration specified that the Maritime Administration would oversee the contractors and the city would secure the funds.

At the time, Assembly members asked to approve the agreement raised concerns. Sheffield assured them that the federal agency was acting as an agent of the city, and the port would remain in city control.

That didn’t happen. Now the city is working to strengthen its role.

Sullivan said he found the 2003 arrangement shocking. The city wasn’t even protected by liability insurance or a contractor performance bond. It is now, city officials said. The city also is working to craft a new agreement with the federal agency.

In addition, two new oversight committees meet weekly. One includes Sheffield, Vakalis and a Maritime Administration official. A separate, technical committee includes representatives from the port, the federal agency and Integrated Concepts and Research Corp., the general contractor and construction manager.

Eventually, Sheffield and Sullivan said, the city must replace the entire dock.

“This is the top of our radar,” Sullivan said. “There’s nothing more important to this administration than getting this port project back on track, making sure we can complete it, so that it can serve the needs of not only this community but all of Alaska for literally generations to come.”